China's move to slap sanctions on North Korea buys time with Trump on trade

BEIJING (BLOOMBERG) - Chinese president Xi Jinping appears to again be back in Donald Trump's good graces - at least for now.

Last week, it looked as if the leaders of the world's biggest economies were on a collision course. North Korea's second intercontinental ballistic missile test in a matter of weeks prompted Trump to lash out at China on Twitter, and a few days later came reports that his administration was getting ready to take steps that could lead to a trade war.

That all changed with a breakthrough at the United Nations on Saturday. After a month of talks, the US and China agreed on sanctions that would cut North Korea's exports by a third, punish some of its biggest companies and cap the number of its citizens working in other countries at current levels.

"It's enough to give the administration some new hope that it can work with China on North Korea and trade," said Dennis Wilder, former senior director for Asia at the National Security Council during the George W. Bush administration. The move would "almost certainly" stop the US from imposing secondary sanctions on China, and may delay a planned investigation into intellectual property theft, he said.

Still, while Chinese Foreign Minister Wang Yi expressed confidence on Sunday that the sanctions would bring Kim Jong Un back to the negotiating table, many North Korea watchers are sceptical that he'll give up his quest for an ICBM that can hit the US with a nuclear weapon.

"If the past decade has told us anything, it is that sanctions and condemnation alone won't do it," said Hans Kristensen, director of the Nuclear Information Project at the Federation of American Scientists. "They must be paired with incentives that make it attractive for North Korea to change."

China - North Korea's main ally and trading partner - has been regularly accused of failing to fully implement previous UN resolutions. After North Korea's second ICBM test on July 28, the US called China and Russia "economic enablers" of Kim's regime.

North Korea: What the latest United Nations sanctions entail

EXPORTS

North Korean exports of coal, iron, iron ore, lead, lead ore and seafood are banned. This will deprive the isolated state of one-third of its export earnings estimated at US$3 billion (S$4 billion) a year.

LABOUR

Countries are prohibited from hiring new North Korean labourers, whose earnings are another source of revenue for leader Kim Jong Un's regime.

INVESTMENTS

New joint ventures with North Korea and any new investment in current joint ventures are banned.

BLACKLIST

Nine North Korean officials and four entities, including North Korea's main foreign exchange bank, are added to the United Nations' sanctions blacklist.

MARITIME

Port calls by designated vessels and chartering of North Korea- flagged vessels are prohibited.

CHEMICAL WEAPONS

The deployment and use of chemical weapons are banned.

China has sought to cool tensions on the Korean peninsula, particularly as Trump administration officials warn that war is possible to stop Kim from acquiring the ability to hit the U.S. mainland with a nuclear weapon. China sees the collapse of Kim's regime as a greater strategic threat that could lead to a refugee crisis and US troops on its border.

The measures agreed to unanimously on Saturday are aimed at cutting North Korean exports by about US$1 billion a year through blocking sales of coal, iron, lead and seafood - a move that could hit labourers and fishermen. Existing joint ventures would be prevented from expanding their operations.

While it's significant, the numbers are also minuscule compared with Iran, which had oil exports curbed and tens of billions of dollars frozen in overseas bank accounts. North Korea's economy - roughly 280 times smaller than China's gross domestic product - grew last year at the fastest pace in 17 years, which may help offset some of the blow.

"The problem with North Korea is it's all too small," said John Delury, an associate professor of Chinese studies at Yonsei University in Seoul, referring to the economic stakes.

"It's trying to use a method that would work after we brought the North Korean economy into the region, into the world. But it's not effective at this stage."

At a meeting on Sunday in Manila, where top diplomats from more than 20 countries are gathering, China's foreign minister Wang made clear that the goal of the sanctions was to push North Korea towards dialogue. He met separately with both North Korean Foreign Minister Ri Yong Ho and US Secretary of State Rex Tillerson, urging both to reduce tensions.

Wang said he also spoke with Tillerson about the need to work together to make Trump's upcoming visit to China maintain "the momentum of healthy development" and help shape Sino-US relations over the next 50 years.

China has repeatedly proposed that North Korea halt further nuclear and missile tests in return for the US and its allies suspending military exercises in the region - a so-called freeze-for-freeze. The US rejects this, saying that Kim must be prepared to give up his nuclear weapons entirely - a prospect that many analysts view as unlikely since Kim sees them as essential to his survival.

"The situation is now in a deadlock because of the U.S. mindset," said Shi Yuanhua, a professor who researches Korea at Fudan University in Shanghai. The sanctions are more "a gesture of condemnation rather than an effective tool to solve the real problem."

For Xi and Trump, it's just the latest twist in a relationship that lurches from good to bad seemingly in the time it takes to write a 140-character tweet.

On the campaign trail, Trump regularly bashed China for stealing American manufacturing jobs. After his first meeting with Xi in April, Trump said they had "great chemistry." In June, he said Xi had failed to rein in Kim's regime. Weeks later he said they had an "excellent" meeting in Germany. And then on July 30 - in a tweet - he accused China of doing "NOTHING" on North Korea.

"The Trump administration has made it explicit that there is a constant trade-off between trade issues and North Korea," Delury said.

"It would appear President Trump is happy with Xi Jinping now, but it wouldn't be surprising in a matter of weeks for a tweet to say now he's disappointed again."

The Straits Times

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